Frank’s CEO tells LAGCOE it’s time to prepare for next upswing in energy sector, possibly in late 2016
Oct 28, 2015
The CEO of a worldwide oil and gas service provider told a crowded room at LAGCOE Wednesday that during lean times like now, the best companies refocus and evolve for the next energy upswing.
As far as when stronger oil prices start to carry the next upswing, Frank’s International CEO Gary Luquette said he could only restate what learned forecasters have called for: a price rebound to breathing-room levels in the second half of 2016.
Even then, he said, it won’t immediately mean greener times for the service providers that employ thousands.
"They (producers) will still be trying to hoard cash,” Luquette said to a standing-room-only crowd at the Louisiana Gulf Coast Oil Exhibition. He said 2017 looks better for a return to profitability.
Luquette has been CEO and president of Frank’s since January. For about 37 years before hiring on at Frank’s, the Abbeville native was an engineer for Chevron, rising to lead the major oil company’s North America operations.
Luquette said oil’s low price — about $46 on Wednesday, up $3 from Tuesday — is part of an economic cycle that can turn a company into a leaner, more responsive and more productive business.He said the current down cycle is the fifth one he’s experienced since graduating from then-University of Southwestern Louisiana in civil engineering in 1978.
Growing leaner and more responsive often begins, however, with trimming the workforce. So far in 2015, Frank’s International has laid off 600 employees, and the company recently announced that another 100 employees would lose their jobs. The company, which operates in 60 countries on six continents, did not say where the affected employees worked.
Luquette said the decisions were painful but necessary.
"Almost anyone can lead an organization when oil is at $100,” he said.
The price of oil started declining from its $100-plus highs in July 2014 and descended below $40 in August before stopping. Luquette noted the differences in predictions: Not long ago, Goldman Sachs said oil could get to $20 a barrel, and Barclays said the price will almost double to $85 by 2020.
He said whatever the short-term price is for oil, a long-distance look shows the world will need oil and natural gas for decades to come. He said "the most optimistic” forecast for how much energy renewable fuels provides doesn’t come close to providing what will be needed.
Luquette’s statements about the world needing the energy from fossil fuels in the next decades aligned with those of a Houston-based oil and gas market researcher.
Paul Hillegeist, president, CEO and co-founder of Quest Offshore, this week told LAGCOE attendees that worldwide demand for oil and gas will grow in the next decades. Hillegeist also said that in the short term, an ever-decreasing number of drilling rigs would eventually lead to reduced supply of oil and an increase in its per-barrel price.
Hillegeist said technology in the energy sector through horizontal drilling and hydraulic fracturing brought on the oil supply glut. He said the current supply-demand imbalance would lead to increasing demand, and that demand would raise the price of oil.
"When? I certainly don’t know,” Hillegeist said.
Hillegeist and Luquette said technology would continue to dominate the energy sector.
Luquette said it’s his responsibility, and every other service company executive, to define how they’ll provide services in the next few years and to implement changes to fit tomorrow’s oil patch.
"Our industry is rapidly evolving and it’s becoming more and more complex,” he said.
LAGCOE concludes Thursday at the Cajundome and Convention Center.